Annual Report 2010/11

Transcription

1 This is a translation into English of the original text in Danish. In case of discrepancies between the two texts, the Danish text shall be considered final and conclusive. Annual Report 2010/11 Satair A/S Annual Report 2010/11 Page 1 of 57

2 LIST OF CONTENTS Satair a global company... 3 Summary... 4 Financial highlights and key figures... 5 Review of operations... 6 New strategy Destination Shareholder relations Corporate governance Management Definitions of key figures and ratios Signatures and independent auditors report Income statement Statement of comprehensive income Balance sheet Statement of cash flows Consolidated statement of shareholders equity Statement of shareholders equity, parent company List of notes Satair A/S Annual Report 2010/11 Page 2 of 57

3 SATAIR A GLOBAL COMPANY Satair is among the world s leading companies in sales and distribution of spare parts for the aviation industry. Over a period of many years the Group has strengthened its position in the aviation industry by means of organic growth and acquisitions, and with its presence in Europe, North America, the Middle East and Asia Pacific Satair provides services to more than 2,200 customers worldwide. In its capacity of important player with a wide product portfolio and global presence, Satair is capable of offering both customers and suppliers access to a large and efficient global network. The Group also offers customers and suppliers an array of services and devotes considerable resources to the development of new business concepts that help reduce supply chain costs to the benefit of customers and suppliers alike. Satair provides sales and spare parts distribution to all types of commercial operators, maintenance workshops and a number of military operators. Satair has approx. 360 employees all over the globe. Mission statement Our mission is to become the global leader in aerospace distribution services by exceeding both customer and supplier needs for competitive and innovative supply chain solutions. Satair values We are committed to serving our customers and our suppliers We succeed through knowledge and competence We demonstrate initiative and commitment We conduct business professionally, ethically and respectfully. Satair A/S Amager Landevej 147A DK-2770 Kastrup Tel: Fax: info@satair.com Incorp. no ISIN code: DK Registered office: the municipality of Tårnby Satair A/S Annual Report 2010/11 Page 3 of 57

4 SUMMARY Fiscal 2010/11 turned out to be one of the most eventful years in Satair s 53 years of history. The most significant events were: August 2010: Acquisition of Aero Hardware purchase sum USD 13.5 million October 2010: Divestment of the OEM activities at a price of USD million March 2011: April 2011: May 2011: Acknowledgements of interest to buy Satair Acquisition of Aero Quality Sales purchase sum USD 30.0 million Announcement of corporate strategy Destination 2014 September The Board of Directors finds that the combination with Airbus offers good strategic opportunities that are likely to accelerate the development of Satair s strategy. Adjustment of the income statement Following the divestment of the OEM activities, Satair s income statement has been restated in relation to the historical reports to the effect that the revenue and earnings stated in the present annual report are contributed solely by the Aftermarket, whereas all earnings contributed by the OEM activities are reported as a discontinuing activity. This applies to both the current fiscal year as well as to the comparative year and the full years 2006/07 to 2008/09, as they appear in financial highlights and key ratios. June 2011: July 2011: Decision to declare an extraordinary dividend of DKK 50 per share Airbus announces its offer to buy all the shares of Satair at a price of 580, totalling DKK 2.6 billion and expiring on 27 September 2011 After the divestment of its OEM activities the Group has focused on the Aftermarket which developed favourably during the fiscal year. This was due partly to fine traffic growth, partly to a particularly keen demand for spares triggered by a steep increase in maintenance activities. The combination of the favourable market environment, in-house efficiencies and improved order execution procedures resulted in an extremely satisfactory financial performance (for the continuing activities): Revenue in 2010/11 of USD million (up 33%) EBITDA of USD 36.2 million against USD 23.2 million last year, and an EBITDA margin of 9.0% against the year-earlier 7.7% Free cash flows before acquisition and divestment of companies of USD 19.8 million, up from USD 7.8 million last year An increase in earnings per share in 2010/11 of 93%, to USD 4.68 per share Including discontinuing activities, earnings per share rose by 334% to USD per share. Guidance for FY 2011/12 Revenue for 2011/12 is expected to rise to approx. USD 500 million, or approx. 24%; EBITDA is expected in the region of USD 44 million, and free cash flows before acquisition and divestment of companies are forecast at around USD 18 million. Offer to buy On 2 August 2011 Airbus made a public offer to the holders of shares and warrants in Satair. The offer expires on % 8% 6% 4% 2% 0% Revenue (USD million) 06/07 07/08 08/09 09/10 10/11 EBITDA (USD million) 06/07 07/08 08/09 09/10 10/11 EBIT & EBITDA margin 06/07 07/08 08/09 09/10 10/11 EBIT margin EBITDA margin Satair A/S Annual Report 2010/11 Page 4 of 57

5 FINANCIAL HIGHLIGHTS AND KEY FIGURES USD million 06/07 07/08 08/09 09/10 10/11 Income statement* Revenue Gross profit Operating expenses (35.3) (43.8) (40.3) (39.8) (47.8) Profit before depreciation and amortization (EBITDA) Profit on primary operations (EBIT) Financial items, net (3.4) (8.8) (9.1) (3.5) (4.8) Profit before tax (5.5) Profit from discontinuing operations Profit for the year Share to Satair A/S of profit for the year Balance sheet Total assets Working capital Total shareholders equity Interest-bearing debt Invested capital Statement of cash flows Cash flow from operating activities (0.6) (7.9) Cash flow from investing activities (1.9) (8.7) (2.1) (0.6) Free cash flow (2.5) (16.6) Free cash flow before acquisition and divestment of companies (3.5) (16.6) Financial key ratios Gross profit, % SG&A margin EBITDA margin, % EBIT margin, % Working capital ratio ROIC after tax % Return on equity, % Financial leverage year-end, % (0.1) Equity ratio, % Share-related key ratios No. of shares at year-end 4,262,267 4,282,252 4,282,252 4,282,252 4,290,481 Average no. of shares, restated 4,262,267 4,294,414 4,282,252 4,282,252 4,327,843 Earnings per share of continuing activities diluted, USD Earnings per share of discontinuing operations diluted, USD Earnings per share diluted, USD Cash flow from operating activities per share, USD (0.1) (1.8) Book value per share, USD Proposed in dividend per share, DKK Proposed in dividend for the year, USDm Declared dividend per share, DKK Declared dividend, USD million Listed share price at year-end, DKK Market cap, USD million Other indicators USD/DKK as of June Average rate USD/DKK No. of employees, average No. of employees, year-end * Financial highlights and key ratios for 2006/07, 2007/08 and 2008/09 and comparative figures for 2009/10 have been restated to reflect the divestment of the OEM activities in relation to the income statement items. See the definitions of key ratios. Satair A/S Annual Report 2010/11 Page 5 of 57

6 REVIEW OF OPERATIONS The decision to divest the OEM activity gave clarification to Satair s corporate strategy and provided a strong financial basis for new growth. Following the divestment, Satair has narrowed its focus area to the commercial Aftermarket where it is strongly positioned and where there are extremely interesting growth perspectives. Divestment of the OEM activities In September 2010, Satair made the decision to divest its OEM activities, and the Group signed an agreement to that effect with B/E Aerospace effective from 27 October Because of the transaction the divested activities were recognised as a discontinuing activity effective from 1 July 2010 and that is also the status under which they have been recognised in Satair s interim reports starting in Q1 2010/11. The sales price achieved for the divested activities totalled USD million (approx. DKK 870 million) stated on a debt-free basis, and the accounting gain from the sale of USD 64.6 million, has been recognised in the income statement. The divestment was part of a strategic adjustment process and resulted in Satair s exit from the market for fasteners and similar aerospace products. The Group continues its main activity, the Aftermarket. The revenue contributed by the divested activities in fiscal 2009/10 came to USD million, or approx. 25% of Satair s revenue at the time. Offer to buy In March 2011, Satair issued a release stating that it had received a number of unsolicited, non-committal inquiries from financial investors concerning a possible takeover of the company. At the time Satair was about to finalise its corporate strategy for the next couple of years, including the long-term financial objectives and the desired capital structure, and for that reason the Board decided not to pursue the specific inquiries, as the timing was found to be inappropriate. In May 2011 the Group announced its new corporate strategy Destination 2014, and the share market gave it a positive reception. Satair then proceeded to roll out a structured process for the purpose of finding the best possible solution for Satair and its stakeholders. The process involved several strategic parties and financial investors. The parties invited to participate in the process were carefully selected so as to identify the most attractive parties for Satair and its shareholders. terms of value and in the interests of shareholders, the employees and other stakeholders. Throughout the process the Board continued to consider alternative options for Satair, including other types of cooperation and a continuation of the Group s current standalone strategy. The Board of Directors finds that the combination with Airbus offers good strategic opportunities that are likely to accelerate the development of Satair s activities. The offer to buy involves an attractive premium to the shareholders compared to the price quoted for the share over the past twelve months as well as an attractive transaction multiple. The Offer also compares favourably with the Group s stand-alone strategy and the generally prevailing risks in aviation, where the market structure is reflective of large OEM entities and other players with targeted strategies to penetrate Satair s business areas. For use in its assessment of the offer to buy, the Board received a fairness opinion from its financial adviser, Steen Associates, and from the independent adviser Carnegie. Both fairness opinions supported the Board s recommendation to the shareholders. On the basis of the above, in view of Airbus declared intentions for the future development of Satair, and based upon the fairness opinions received, the Board unanimously decided to recommend the holders of shares and warrants to accept the offer which expires on 27 September Acquisitions Satair carried out two acquisitions and implemented three Eaton product lines in fiscal 2010/11, and these activities made an aggregate contribution to growth of 13%, corresponding to USD 38.3 million. Aero Hardware In August 2010 Satair announced an agreement for the acquisition of all assets and activities in Aero Hardware at a total amount of USD 13.5 million. Aero Hardware specialises in the manufacture of finished hydraulic hoses for the aerospace industry, and the company s special competencies allow access to an extremely wide product programme. The products are used for all Airbus and Boeing aircraft and for practically all other large and small types of aircraft. The acquisition will help Satair achieve its growth ambitions, while at the same time increasing the product range available to customers and strengthening the relations with Eaton Aerospace, which is one of Satair s largest suppliers. Aero Hardware had 29 employees at end-june 2011 and has been integrated into Satair under the name of Satair Miami. Satair s Board of Directors is unanimous in its recommendation of the Offer, which it believes to be attractive in Satair A/S Annual Report 2010/11 Page 6 of 57

7 Y/Y growth % Y/Y Growth % Aero Quality Sales (AQS) In April 2011 Satair announced the takeover of Aero Quality Sales (AQS), a leading distributor of batteries to the aerospace industry, at a price of USD 30.0 million. AQS is a good match for Satair s business model, and the Group expects to be able to make use of its strong market position to achieve significant growth in sales of batteries and to achieve cost synergies. The acquisition will also contribute to solidifying Satair s growth ambitions within valueadded services. AQS is a supplier of batteries for practically all types of aircraft and has sales and service centres in Stamford, Connecticut, USA and in Heston outside London. AQS had 21 employees at end-june The above two acquisitions contributed just over half of the acquisition growth, the remaining part being contributed by the added Eaton product lines which developed on a par with expectations. Market developments passenger transport Air traffic showed fine growth rates in fiscal 2010/11. The figure below outlines the annual growth on a month-bymonth basis, both for air traffic (passengers) and for capacity (number of seats). The growth in capacity is reflective of a higher number of aircraft in the air, and that increases the demand for maintenance and, hence, for Satair s products. The average growth in capacity in FY 2010/11 stood at 8%. The striking growth in traffic and capacity in April 2011 reflects the effect in April 2010 of the ash cloud on Iceland, which brought large parts of air travel to a standstill. The increase in capacity is the result of the delivery of new aircraft from the manufacturers as well as of the return to service of decommissioned aircraft parked in the desert during the financial crisis. Before being returned to service these aircraft have to go through a maintenance check, and that is one of the reasons why the growth in the Aftermarket in the period in review was generally higher than the growth in capacity. Another reason is the replenishment of inventories undertaken by aircraft manufacturers and maintenance providers because of the larger fleets. And lastly, several air carriers have started up previously postponed maintenance and upgradings of their aircraft. The combined effect of the above factors explains the extremely favourable market environment all through the fiscal year. 18% 16% 14% 12% 10% 8% 6% 4% Development in international passenger traffic and capacity Capacity (ASK) Passenger traffic (RPK) Market developments air cargo The demand for air cargo is determined by developments in world trade. In 2010 the international export volume increased by 14.5%, which is the largest increase since measurements began in The highest increases in exports, 23%, were posted in Asia, led by China. This boom in world trade in the wake of the severe recession in 2009 caused a considerable increase in the demand for air cargo. The increase was highest early in the year and has been edging downwards since then. WTO has announced a forecast for 2011 that shows an increase of 6.5% in global exports. The figure below shows the developments in air cargo and capacity in the period in review, and the trend is clear. Early in the period the annual growth rate in the value of air cargo rose above 20%, only to end up in a minus of 3% 12 months later. For the fiscal year as a whole air cargo capacity increased by 8%, making 2010/11 an extremely good year for those products in Satair s product range that are related to air cargo. 25% 20% 15% 10% 5% 0% -5% Development in international freight and capacity Source: IATA Carrier Tracker Freight Capacity (AFTK) Freight Volume (FTK) Developments in revenue in 2010/11 As of 1 July 2010, the divested OEM activity is recognised as a discontinuing activity, and the income statement for the full year 2010/11 and the comparative year 2009/10 have been cleared of OEM activities, which are stated in separate lines under discontinuing activities. Satair s primary market is the Aftermarket, where the Group s activities include sales and distribution to all types of commercial operators, maintenance workshops and a number of military operators. Satair is a global distributor within aftermarket services and has sales and warehousing locations in Europe, North America, the Middle East, and Asia Pacific. Revenue in fiscal 2010/11 increased from USD million to USD million, up USD 99.8 million or 33%, driven by organic growth of USD 61.5 million (20%) and growth from acquisitions of companies and product lines totalling USD 38.3 million (13%). 2% 0% Source: IATA Carrier Tracker Satair A/S Annual Report 2010/11 Page 7 of 57

8 The regions contributed growth as follows: USD million 2009/ /11 Actual growth Organic growth EMEA % 14% Asia Pacific % 15% North/South America % 37% Total % 20% The steep increase in growth in North/South America in 2010/11 has levelled out the differences in revenue contribution from the Group s three main regions. Regions The revenue contribution from EMEA (Europe, the Middle East and Africa) in 2010/11 totalled USD million, or 36% (39% in 2009/10) of consolidated revenue. Revenue in Europe increased 25% driven by strong growth in the large markets (UK, France and Germany). Other countries also contributed fine growth. Organic growth came to 13%, with growth from acquisitions standing at 12%. Many European customers still feel the effects of the crisis and fail to achieve growth at the same high level as the other regions. The Middle East generated revenue growth of 31% of which 27 percentage points was organic, and the region still accounts for 7% of Satair s revenue. The region is reporting of significant growth in the aircraft fleet and performs part of its operations to and from the other regions. Africa posted only moderate growth due to the unrest in several countries in North Africa. The revenue contributed by Asia Pacific totalled USD million, up 21% of which organic growth accounted for 15%. The region generates 32% of the Group s consolidated revenue. The highest growth rates were contributed by China, Hong Kong, India and South Korea. The achievement of 32% in growth in 2010/11 makes China the second-largest market for Satair after the USA, and there are no signs of stagnation. Revenue declined in Japan and Indonesia due to factors such as the tsunami in Japan. North and South America posted revenue of USD million, reflecting an increase of as much as 61% of which 37% was organic. This is highly satisfactory. The acquired businesses in Miami and Stamford, Connecticut, and the acquired product lines made a total contribution of USD of 19.7 million for the region. The new sales strategy and the strongly improved delivery capacity were the main drivers of this outstanding organic growth. The largest contribution by far to revenue growth was attributable to the USA, with revenue in the countries in South America posting 25% in growth overall. The region accounts for 32% of the Group s consolidated revenue. Product lines All major product lines posted fine growth in the period in review, the main drivers being the increase in aircraft capacity, the carrying out of postponed maintenance and the replenishment of inventories. The strong growth in world trade resulted in high activity levels in the freight market, and this again triggered a keen demand for spare parts and components for Telair s systems. The two acquisitions involved the introduction of new product lines. Major efforts were devoted to the integration of Satair Miami from both an operational and sales point of view. The battery products from AQS accounted for a modest proportion of revenue at the time of the acquisition, which was late in the fiscal year. The aggregate revenue contributed by the acquired businesses was on a par with expectations, and the integration proceeded according to plan. The phasing-in of Eaton s product lines continued as planned, and considerable improvements have been achieved in the provision of service to customers. Boeing was expected to start deliveries of the 787 Dreamliner, but the launch was postponed several times. The first delivery has now been scheduled for the autumn of The launch of Boeing s new jumbo series, the 747-8, is also delayed, and for that reason none of these types of aircraft will have a significant effect on Satair s revenue in the present fiscal year. Blue Sky Alliance Satair and its partners in this joint venture have decided to wind up the company following the announcement by the primary partner, Airbus, that it has chosen a different strategy. Gross profit Gross profit came to USD 81.9 million against USD 63.1 million in 2009/10, up 30%. The gross margin stood at 20.3% against 20.8%. Operating expenses Operating expenses (selling, general and administrative expenses) aggregated USD 47.8 million against USD 39.8 million in 2009/10, reflecting an increase in operating expenses of 20% of which the acquired activities Satair Miami and AQS accounted for a total of 7%. The average USD/DKK rate in 2010/11 rose by 2.0% and stood at 548 for the year as a whole. Compared with 2009/10, the increase in the average USD/DKK rate caused an improvement in total operating expenses of approx. USD 0.5 million, which brings the underlying growth in costs adjusted for currency and acquisitions to the level of 12% against the organic revenue growth of 20%. The SG&A margin improved considerably in 2010/11 and ended at 11.9% for the year as a whole against 13.1% in 2009/10. Satair A/S Annual Report 2010/11 Page 8 of 57

9 USD/DKK The SG&A margin is declining despite the basically unchanged fixed costs of the functional management structure and the running of SAP after the sale of the OEM activities, and this is evidence of improved efficiencies. At end-june 2011 the Group had a total of 356 full-time employees against 299 at end-june The acquired activities contributed a total of 50 employees. EBITDA EBITDA for fiscal 2010/11 came to USD 36.2 million against USD 23.2 million in 2009/10, up 56%. The steep revenue growth led to major cost efficiencies, and that accelerated earnings. Not unexpectedly, the strong sales growth had a certain adverse effect on the gross margin, which declined by 0.5 percentage points in 2010/11. The EBITDA margin came to 9.0% against 7.7% last year. USD 1.5 million in foreign exchange losses on monetary debt items in foreign currency, up from USD 0.1 million in 2009/10. Also, the amount in financial net costs reflects the positive effect of the Group s redemption of all bank debt in October 2010 upon receipt of the proceeds of the divestment of the OEM activity. The redemption of the bank debt made it unnecessary to apply the rules on hedge accounting to an amount of USD 53.6 million in interest hedging of debt. Accordingly, in 2010/11 an amount of USD 0.3 million in fair value adjustment of interest hedging contracts was recognised as an expense item against an income item of USD 2.0 million in 2009/10. Profit before tax Profit before tax for 2010/11 came to USD 25.9 million against USD 14.9 million in 2009/10. Hedging of future currency cash flows In keeping with the Group s risk management policy, hedging has been arranged of the USD 35 million in expected net cash flows in EUR and DKK for the full fiscal 2010/11 at an average USD/DKK rate of 575. The average USD/DKK for the year was 548. Fiscal 2010/11 included a total realised gain of USD 2.2 million from the hedging of operating expenses, and at end-june 2011 the amount in shareholders equity included an income item of USD 0.1 million relating to operating expenses likely to be incurred in FY 2011/ USD/DKK 1 July June 2011 Profit from discontinuing activities The profit from discontinuing activities relates to the divestment of the OEM activity effective from 27 October The total amount in cash proceeds from the sale was USD million, and the accounting profit comes to USD 64.6 million with addition of the operating profit from the OEM activity from the opening of the year until the time of divestment, a total of USD 2.1 million. Profit Profit after tax for 2010/11 came to a total of USD 86.9 million against USD 19.8 million in 2009/10. Cash flows The free cash flow before the acquisition and divestment of companies came to USD 19.8 million in 2010/11, up from USD 7.8 million in 2009/ jul-09 aug-09 sep-09 Amortisation and depreciation The amount in amortisation and depreciation includes amortisation of acquired distribution rights and the investment in SAP as well as the depreciation of other fixed assets, and it is taken to the income statement in accordance with the adopted accounting policies. The accounting item amortisation includes a total of USD 0.4 million in amortisation of distribution rights acquired in 2010/11. Financials okt-09 nov-09 dec-09 jan-10 feb-10 mar-10 apr-10 maj-10 Financial net costs totalled USD 4.8 million for 2010/11 against USD 3.5 million in 2009/10. The accounting item reflects the considerable impact of the weak USD/DKK rate which declined by 15% in 2010/11 as illustrated in the above chart. The decline of the USD resulted in a total of jun-10 jul-10 aug-10 sep-10 okt-10 nov-10 dec-10 jan-11 feb-11 mar-11 apr-11 maj-11 jun-11 The cash flow from investing activities totalled USD million and consists of USD million from the divestment of the OEM activities including transaction costs, etc., reduced by the acquisition of activities in the form of Satair Miami and AQS of a total value of USD 40.7 million. As regards Satair Miami, USD 5.0 million of the purchase sum was financed by means of a debt instrument issued by the vendor which was due in August The cash flow from financing activities consists of the amount in ordinary dividend declared in October 2010, DKK 8.00 per share, and the extraordinary dividend declared in June 2011, DKK per share. A total of USD 6.8 million in dividend tax remained unpaid in July In December 2010 and February 2011, in connection with the incentive programme the Group carried out capital increases by issuing a total of 8,229 shares at a price of DKK 250 per share. The total proceeds from the issue came to USD 0.4 million. The costs of the capital increases amounted to USD 3,000. Satair A/S Annual Report 2010/11 Page 9 of 57

10 Balance sheet In accordance with the IFRS provisions, assets and debt relating to the discontinued activities are not stated separately in the comparative figures, and for that reason the balance sheet at end-june 2011 cannot be directly compared with previous years. At end-june 2011 the total working capital came to USD million, corresponding to 29.1% of the revenue posted for the past 12 months. In comparison the level at end-june 2010 was 41.8%. Accordingly, the divestment of the OEM activities caused a significant reduction of the capital tied up in working capital. The risk of losses on trade debtors or obsolete inventories is considered to be unchanged. Cash resources After the divestment of the OEM activities, the total amount in net interest-bearing debt has now changed from being net bank debt to being a net bank deposit, now including investments in securities, at a value of USD 9.1 million including a portfolio of short-term bonds and after payment of the extraordinary dividend. The amount in total drawing rights stands at USD million, and at end-june 2011 a total of USD 8.2 million had been utilised. Of the total drawing rights of USD million, USD 65.0 million is covered by a contractual obligation by the lender with a term of 3 years. Guidance for FY 2011/12 Market developments Developments in air traffic are closely linked to developments in the world economy in general. The latest IMF forecast from June 2011 included expectations of growth in 2011 of 4.3% and 4.5% in An IATA analysis from August 2011 includes expectations of 4-5% in annual growth in air traffic. RBC Capital Market expects around 5% growth in traffic and capacity in 2011, and 4% in According to IATA, the growth figures for the first half of 2011 were 6.5% for traffic and 7.1% for capacity stated before the major turbulence erupted in the financial and share markets in August Financial guidance The expectations for FY 2011/12 announced in release no. 207 dated 27 July 2011 are maintained. Revenue in 2011/12 is thus forecast in the region of USD 500 million, reflecting growth of approx. 24%, and an EBITDA of around USD 44 million. EBITDA has been stated before transaction costs for the sale to Airbus of the Satair Group. On the assumption that the transaction goes ahead as planned, the transaction costs are expected to aggregate USD 5.0 million for recognition as expenses in FY 2011/12. The free cash flow before acquisition and divestment of companies is forecast at around USD 18.0 million. The guidance builds upon a USD/DKK rate of 525. NEW STRATEGY DESTINATION 2014 In May 2011 Satair presented its new corporate strategy, Destination The development and initiatives contained in it will be pursued by Satair over the next 3-5 years regardless of the outcome of the acquisition process. Background For the past ten years, Satair has achieved sizeable revenue growth in the Aftermarket segment. This has enabled the Group to position itself among the world s leading providers in sales and distribution of spare parts for aircraft maintenance and services. Satair has succeeded in benefiting from the economies of scale offered by sales growth, resulting in an improvement in profitability year by year. Satair has a group of motivated and committed employees positioned in the key areas of the aerospace industry: the USA, Asia Pacific and Europe, and they are well organised and supported by an efficient SAP system. Satair s capitalisation allows it to make acquisitions to accelerate revenue growth in the years ahead in a combination with a higher EBITDA margin. The next couple of years will be devoted to the implementation of the many identified improvement measures and growth initiatives. The main areas of the strategy The new strategy consists of two main areas: A) Initiatives aimed at growing revenue B) A number of activities aimed at optimising the internal processes. A) The initiatives aimed at growing revenue consist of four overarching measures: 1) The addition of new product lines 2) Optimal utilisation of the existing sales and marketing structure 3) Acquisition of companies 4) The addition of new services Several initiatives have been identified for a strengthening of sales and marketing efforts, and they are scheduled for implementation within the next years. Satair has also drawn up a list of potential takeover candidates and new product lines for further investigation and has identified Satair A/S Annual Report 2010/11 Page 10 of 57

11 several new services, among them component handling and customer integration. B) The optimisation of internal processes includes two sub-areas: 1) Efficiencies in the Sales and Supply Chain organisations 2) The Finance, IT and HR organisations. Efficiencies in the Sales and Supply Chain organisations will be achieved by the implementation of a number of optimisation projects several of which build upon the Lean concept. The Finance, IT and HR organisations will contribute to the process by the establishment of new incentive schemes and by ensuring that the necessary competencies and resources are available for the implementation of and adherence to the growth strategy. Innovation Satair s customers and supplies want business partners capable of adding value to the value chain, and Satair receives many requests for new services. With a strengthening of its innovation activities, Satair will be able to forge closer relations with customers and supplies while at the same time tapping into the interesting growth opportunities in services. For that reason Satair must become an innovative business. Innovation management must be strengthened, and the Group must improve its ability to offer new services. Human resources Satair s values are created by the employees, and under the new strategy the Group will continue its development of competencies, the establishment of clear objectives and the development of a global mindset. This will be done by means of global processes and other initiatives. Employee development builds upon the relationship between employee and manager and involves regular meetings to follow up on developments. It also involves an array of training programmes aimed at developing the employees and enabling them to meet new requirements. All managers attend focus management training programmes to ensure that Satair s management philosophy and corporate values are firmly rooted in the organisation. The Group will develop a special talent programme to retain and develop young in-house talents. Clear objectives and development plans must be drawn up for all employees, and they must be supportive of the company s strategic objectives. Managers will be evaluated once a year in a performance analysis. Satair devotes considerable resources to the development of its employees in its endeavours to have the most competent workforce in the industry. The financial objectives of the strategy The financial objectives for the next 3-5 years are: Average annual revenue growth in the region of 15-17% before new acquisitions An EBITDA margin that inclines to the level of 11% end-of-period An annual free cash flow, before any acquisitions, of minimum USD 30 million p.a. end-of-period A return on capital, stated as ROIC (including goodwill and after tax), of minimum 18% p.a. end-of-period A gearing of two to three times EBITDA, i.e. EBITDA rated against net interest-bearing debt end-of-period. The objective for revenue growth builds upon an underlying market growth of 5-6% p.a. during the above period and a USD/DKK rate of 525. The above forward-looking statements about Satair s objectives, in particular those that relate to future sales and operating profit, are subject to risks and uncertainties as various factors, many of which are outside Satair s control, may cause the actual development to differ materially from the expectations contained in this report. Factors that might affect such expectations include, among others, major changes in the market environment, including the global economy and the events in the Middle East and Japan, etc., currency fluctuations, changes in the product portfolio, the customer portfolio and company acquisitions or divestments. Social responsibility Satair strives to run its business in a responsible manner and wishes to comply with legislation in the countries and local communities in which it operates. Satair has drawn up specific objectives and policies in a number of relevant areas, but the Group has not adopted an actual policy for the integration of social responsibility in its corporate strategy and activities. For that reason the present statement on Satair s social responsibility does not include information about the standards applied by the Group; information about the way Satair translates policies into action; an assessment of Satair s achievements, and its expectations concerning future efforts in this area. Satair s considerations in relation to social responsibility and the work hitherto done in the field have been based upon the Group s business model, which builds upon its ability to act with a high degree of credibility and deliver quality in services and products. Quality and predictability are key services in Satair s business area, and for that reason Satair wishes to appear a trustworthy and attractive business partner for all stakeholders in the markets and countries in which the Group operates. For the purpose of the present statement stakeholders are defined as a wide circle of suppliers, customers, employees, shareholders, public authorities, potential new employees and society in general. Satair A/S Annual Report 2010/11 Page 11 of 57

12 The above fundamental attitude is reflected in contracts and agreements signed by the Group in which the overall goal is primarily to create the necessary framework for a cooperative effort that builds upon trust and decency and is developmental for the participants. For that reason social responsibility is a natural consequence of Satair s general attitude. The environment In the performance of its business activities the Group endeavours to assess and reduce the impact on the environment, and it strives to make both a direct and indirect contribution to a sustainable environment. The direct environmental impact from Satair is extremely limited, as its business activities comprise distribution and service provision. However, the Group nevertheless aims at being vigilant. The most important environmental impact comes from the use of electricity. The Group is not involved in any contamination cases and is not covered by the provisions of Danish legislation on environmental permits; nor is it covered by the Danish act on environmental corporate reporting in the form of green accounts. Incentive schemes It is part of the Group s strategy to establish incentive schemes to make sure that management, employees and shareholders are endeavouring to achieve common goals. The share-based part of the existing incentive scheme expired at the closing of FY 2009/10, and due to the efforts devoted to the new corporate strategy and the subsequent structured process it has been considered inappropriate to establish a new share-based incentive scheme. Warrants programme The existing warrants program was established in late FY 2006/07 and expired in June At end-june 2011 a total of 12 persons, including the Executive Committee and a former employee, had a total of 111,999 outstanding warrants. and business area. The size of the bonus depends upon the degree of fulfilment of each of the predefined targets. Employee shares Satair has been offering employee shares on a regular basis, most recently in December The employee shares, which are currently placed on trust, account for a total of 0.5% of the total share capital. At the closing of FY 2010/11 a total of 48% of the Group s employees held Satair shares, accounting for about 1.8% of the share capital. Proposals for the Annual General Meeting Given the offer made for the company and the terms outlined in section 3.2 of the Offer Document, which provide that the offer price of DKK 580 will be reduced on a DKKfor-DKK basis in the event of any declarations of dividend, the Board of Directors has decided to propose to the Annual General Meeting that no dividend be declared for fiscal 2010/11. Tthe Board thus recommends to the company in general meeting that the profit for the year, USD 86.9 million, be transferred to the free reserves. The Board proposes to maintain the ordinary emolument of USD 35,000 to board members and USD 80,000 to the chaiman of the Board. Furthermore, in a reflection of the considerable additional workload undertaken by the Board in fiscal 2010/11, the Board proposes an extraordinary emolument of USD 35,000 to ordinary board members and USD 80,000 to the chairman of the Board. If the offer to buy made by Airbus on 6 August 2011 has not come through at the time of the Annual General Meeting, the Board recommends the re-election of N.E. Nielsen, William E. Hooever, Yves Liénart, W. Nicholas Howley, Finn Rasmussen and Carsten Sørensen. Warrants earned may be exercised in the period until the publication of the Annual Report 2012/13 during the trading windows occurring during that period. See more information about the warrants programme in note 33. The exercise price for the warrants at the closing of fiscal 2010/11 was calculated at DKK against DKK 250 before the decision in June 2011 to declare an extraordinary dividend. Bonus programme In June 2007 it was decided to roll out a new bonus programme covering the same group of people as the warrants program. An annual cash bonus is allocated on the basis of the fulfilment of targets defined for each individual participant in relation to his or her personal development Satair A/S Annual Report 2010/11 Page 12 of 57

13 SHAREHOLDER RELATIONS Price jul 10 aug 10 sep 10 okt 10 nov 10 dec 10 jan 11 feb 11 mar 11 apr 11 maj 11 jun 11 No. of shares Trading volume Price MidCap, relative Basic data about Satair Share capital 85,809,620 No. of shares 4,290,481 Denomination 20 DKK No. of share classes 1 Voting right restrictions Listing locations Trading symbol ISIN code Bloomberg code Reuter code Index Investor Relations None NASDAQ OMX Copenhagen SAT DKK SAT DC SATA.CO MidCap It is Satair s ambition that the share price should always reflect the company s actual and expected ability to create shareholder value. Satair endeavours to attain this ambition by communicating regular, timely, accurate and relevant information about the company including its strategy, results and expectations. By means of detailed reporting, Satair aims to give its stakeholders simple and convenient access to information, and the Group stresses the importance of engaging in an active dialogue with its stakeholders. For instance, the Executive Committee regularly participates in meetings with investors, analysts and the media. Communications and share-related presentations from Satair are made available on the company s website, immediately upon their publication. The Satair share At end-june 2011 the share capital consisted of 4,290,481 shares in denominations of DKK 20, corresponding to a share capital of DKK 85,809,620, see the table below. Movements in Satair s share capital No. of shares in denominations of DKK 20 Share capital, DKK IPO in ,005,073 40,101,460 Issue of employee shares in ,000 1,000,000 Issue of employee shares in , ,000 Issue of employee shares in , ,000 Issue of shares in ,000 6,000,000 Issue of employee shares in , ,000 Targeted placement in November ,000 4,900,000 Pre-emptive issue in January ,349,252 26,985,040 Targeted placement in May ,942 4,258,840 Issue of employee shares in December , ,700 Exercise of warrants in December ,000 20,000 Exercise of warrants in February , ,580 Total at 30 June ,290,481 85,809,620 Pursuant to the Articles of Association, in the period until 31 December 2011 the Board of Directors is authorised to increase the share capital by up to nominal DKK 1,000,000 through the issue of employee shares. Moreover, in the period until 30 September 2011 the Board of Directors is authorised to increase the share capital by up to nominal DKK 400,000 through the issue of bonus shares to the employees. In end-june 2011 the price of the Satair share was 431.5, reflecting an increase of 144% during fiscal 2010/11 which includes the DKK 50 in extraordinary dividend per share declared in June In the same period the MidCap index of NASDAQ OMX Copenhagen increased by 1%. Satair A/S Annual Report 2010/11 Page 13 of 57

14 The total volume of Satair shares traded in FY 2010/11 stood at 1,727,478 (1,588,077 in FY 2009/10), corresponding to approx. 40% of the total number of shares in the Group. The Satair share is followed by the analysts at SEB Enskilda and Nordea. Shareholders Just under 5,000 shareholders had arranged for name registration of their shares at the closing of fiscal 2010/11, representing 97% of the share capital. Shareholders having filed ownership of 5% or more of the share capital: ATP (labour market pension scheme) Kongens Vænge 8, 3400 Hillerød, Denmark (8.3% of the share capital and voting rights). Matignon Investissement 2 FCPR 1, rue de la Faisanderie, Paris, France (8.1% of the share capital and voting rights). Compagnie du Bois Sauvage s.a. Rue du Bois Sauvage 17 B, 1000 Brussels, Belgium (5.8% of the share capital and voting rights). The Group had no holding of treasury shares at the closing of FY 2010/11. Members of the company s Board of Directors and Executive Committee held a total of 2.1% of the share capital at 30 June Some of the agreements signed by Satair contain provisions that will take effect, or that may take effect, in the event of a change of control, including agreements signed with customers, suppliers, credit institutions and members of Satair s top management. See also notes 2, 4 and 27. Dividend Given the offer made for the company and the terms outlined in section 3.2 of the Offer Document, which provide that the offer price of DKK 580 will be reduced on a DKKfor-DKK basis in the event of any declarations of dividend, the Board of Directors has decided to propose to the Annual General Meeting that no dividend be declared for fiscal 2010/11. Annual General Meeting is held on 31 October 2011 at 10am at the Hotel Crown Plaza, Ørestads Boulevard 114, DK-2300 Copenhagen S. Inquiries concerning Satair from shareholders, analysts, investors, stockbrokers and other stakeholders should be addressed to Satair A/S Amager Landevej 147A DK-2770 Kastrup Tel: IR-responsibles: CEO John Stær jst@satair.com CFO Michael Højgaard mih@satair.com VP Investor Relations: Pål Rikter-Svendsen prs@satair.com Releases to NASDAQ OMX Copenhagen in 2010/11, except for releases concerning share transactions August Satair completes the acquisition of Aero Hardware in the USA 14 September Annual Report 2009/10 25 October Satair focuses its business by divesting its OEM activities 25 October Annual General Meeting 27 October Satair completes the divestment of its OEM activities 26 October Satair establishes a new global organisation 10 November Report for Q1 2010/ February Report for Q2 and H1 2010/11 29 March Acknowledgements of interest in the company and announcement of corporate strategy 8 April Satair takes over Aero Quality Sales 10 May Report for Q3 2010/11 12 May Announcement of new corporate strategy 16 May Satair s new growth strategy and long-term financial objectives 15 June Extraordinary General Meeting 15 June The Chairman s presentation at the extraordinary General Meeting 15 June Resolution to declare an extraordinary dividend Financial diary 31 October 2011 Annual General Meeting 30 November 2011 Report for Q1 2011/12 9 February 2012 Report for Q2 2011/12 11 May 2012 Report for Q3 2011/12 30 June 2012 Closing of fiscal 2011/12 Satair A/S Annual Report 2010/11 Page 14 of 57

15 CORPORATE GOVERNANCE Management structure Satair has a dual management structure consisting of the Board of Directors and the Executive Committee. There is no overlap of membership between the two bodies. The Board of Directors is responsible for the general management of the Group and considers all matters of relevance to its overall development, including its objectives and strategies, budgets, risk management, proposals for mergers, acquisitions and divestments of companies, and major development and investment projects. The Board of Directors also supervises the work done by the Executive Committee. The Executive Committee is employed by the Board of Directors that also lays down the terms of employment and the framework for the work to be done by the Executive Committee. The Executive Committee is responsible for the day-to-day management of the Group, including the development of its activities and operations, its performance and internal development as well as the implementation of its strategy and the overall decisions approved by the Board of Directors. The performance of the Executive Committee is evaluated by the Board of Directors. The shareholders are the highest authority in the Group and they exercise their influence at the annual general meetings. Matters to be resolved by the annual shareholders meeting are generally decided by simple majority. The adoption of special resolutions, such as proposals to amend the Group s Articles of Association and to change the size of its share capital, requires the support of two thirds of the votes cast and two thirds of the voting stock represented at the meeting. The work of the Board of Directors The Board of Directors held 22 meetings in 2010/11, and on 14 occasions a member cancelled his/her attendance. Most cancellations were from board members residing outside Denmark and related mostly to conference calls convened at short notice. In order to ensure that the Board of Directors is kept adequately updated about the running of the Group, the members of the Executive Committee attend the meetings of the Board. At these meetings, the members of the Executive Committee have a right to speak, but not a right to vote, and they do not attend the meeting during the discussion of items reserved exclusively for internal consideration by members of the Board. The Board operates on the basis of an annual working schedule to ensure that all relevant topics are dealt with in the course of the year. Budgets are discussed at a meeting in June, and the corporate strategy is discussed at a spring meeting. The Board has set up two committees an Audit Committee and a Remuneration Committee. The terms of reference of the two committees are available on the Group s website. The Audit Committee has two members: Finn Rasmussen (chairman) and Carsten L. Sørensen, and it held two meetings in 2010/11. The Audit Committee functions as a preparatory body for the work done by the Board of Directors and the resolutions it has to make. Prior to the final discussion of an item by the Board of Directors, the Executive Committee presents aspects in relation to particularly risky decisions such as accounting estimates, foreign exchange and finance policy and special tax aspects to the Audit Committee. Accordingly, there is no independent decisionmaking competence vested in the Committee. The Remuneration Committee has three members: N. E. Nielsen (chairman), W. Nicholas Howley and William E. Hoover, and it held two meetings in 2010/11. The Remuneration Committee oversees the remuneration paid to members of the Executive Committee to ensure compliance with the adopted policy. The Board of Directors evaluates its performance annually by means of a questionnaire for the purpose of improving its work and cooperation with the Executive Committee. The evaluation did not take place in FY3020/11 due to the considerations about the future strategy. The composition of the Board of Directors The Board has nine members of whom six are elected by the annual Shareholders meeting and three are elected by the employees. The former group is elected for a term of one year and may be re-elected. The members elected by the annual Shareholders meeting resign from the Board at the annual Shareholders meeting held in the year they turn 70, unless the Board unanimously decides otherwise. The members elected by the employees sit for a term of four years, and this term was fixed in pursuance of the provisions of the Danish Company Act. See p. 18 of this Report for a presentation of the individual board members. The Board members elected by the shareholders are all considered independent. The Chairman of the Board is a partner of LETT lawfirm which in certain cases acts as legal adviser to Satair. However, Satair also retains the services of other legal advisers, and the business relationship between LETT lawfirm and Satair is not deemed to be material to either party. The seniority among the members of the Board averages 9 years for the members elected by the shareholders and 8 years for the members elected by the employees. When the Board proposes new candidates for board membership, it does so only after a careful assessment of the knowledge and professional experience needed to ensure the presence on the Board of all the necessary competencies. Also, the Board strives to achieve the best possible composition in relation to age, background, gender, etc., so as to ensure a competent and diverse contribution to the work performed by the Board. Satair A/S Annual Report 2010/11 Page 15 of 57